Volatility targeting

Sizing each position so its expected dollar movement is roughly constant across instruments and regimes, using an instrument’s point value, its recent volatility (often ATR), and a chosen percentage of capital at risk. When volatility doubles, the position roughly halves. The core of Carver’s framework; its main trap is needing a volatility floor so a calm market cannot inflate size without limit.

First used in Lesson 2.6 · Position sizing and risk: how much, and how not to blow up — the lesson that makes this term real.